Wayne Barrett: Ed Towns, Watchdog? Has Congress Forgotten Ed's Past?

Poised to succeed the legendary Henry Waxman as chair of the House Oversight and Government Reform Committee, Brooklyn congressman Ed Towns was once the target himself of a federal probe.

While Towns was not indicted, his videotaped receipt of a cash payment in an undercover operation raises questions about his appropriateness to head the House's premier investigations committee, particularly at a time when it may be called upon to probe the financial scandals that led to the current economic meltdown.

Brooklyn federal prosecutors and the New York City Department of Investigation (DOI) caught Towns on videotape stuffing $1,300 in cash into his pockets in an undercover sting in 1982, when he first ran for Congress. Apparently, he was tipped off that the three Salini Construction Company executives were actually cops, and he returned the money a few days later and wasn't indicted.

Towns' taped performance in Operation Labor Day, which resulted in 16 convictions including a powerful city councilman, is reportedly available in archives at DOI and the U.S. Attorney's office in Brooklyn. Ed Gruskin, who was then the city's top undercover operative in corruption cases and is now retired, told the Voice: "It was a makeable case. You see Towns taking the cash. We told him we don't care what you do with it. It's money for you. Buy yourself a boat. It's not necessarily a contribution." Gruskin's construction company, which was created by DOI and actually built a community center next door to Towns' congressional campaign office, "needed his help expediting a permit or something and he promised to do that."

Towns, who was then Brooklyn's deputy borough president, also allegedly promised to help with federal contracts once he was elected to Congress, which was all but certain at the time of his meeting in Room 308 at 50 Court Street in downtown Brooklyn, where Salini was headquartered. Gruskin doesn't specifically recall that Towns promise, though he says it's "very plausible." Two other law enforcement sources that also worked on the case do remember allusions to federal contracts. "I'll be your friend in Washington," was what one former DOI supervising attorney recalls Towns telling Salini. "It was really a close question of whether or not to indict him."

The Voice published a story about Towns' conduct in November 1983 that relied on unnamed sources. While several of those sources contacted by the Voice remain unwilling to talk for the record, Gruskin and others did step forward.

Edmundo Roman, a Democratic district leader and ally of Towns at the time, was indicted but acquitted in the Labor Day cases. A practicing attorney in Brooklyn now, Roman testified during his 1984 trial that he was told by none other than the then Democratic boss of Brooklyn, Meade Esposito, to stay away from Salini. Roman told the Voice last week that another leading Democrat, Tom Catapano, who had been Esposito's driver and was running for assembly for the first time on a ticket with Roman, also "warned me to stay away because they may be undercover agents."

Esposito and Catapano were closely allied with Towns at the time, and as recently as 2006, Towns placed a tribute to Roman's wife Elba in the congressional record. Roman said he and his wife did not tip Towns off, but it is highly unlikely that Towns, a far more important player in Esposito's party machine than Roman, wasn't warned as well. Bill Banks, who was Towns' campaign manager, returned the cash, according to law enforcement sources. Esposito is dead, and the Voice was unable to locate Banks, who has moved to Atlanta. Catapano, who is also dead, served five terms in the assembly until he was defeated by the current assemblyman, Darryl Towns, the congressman's son.

Andrew Fisher, who was Towns' campaign attorney in 1982, says now: "He mistakenly took cash. He thought it was legal to take cash contributions, but when it was pointed out to him by his counsel that it was inappropriate, he showed them the door." Fisher said that he attended another meeting with Salini and that the company executives asked Towns to help them get vacant city property "for a buck a lot," and that he subsequently told Towns: "These guys are either gangsters or cops and they're too stupid to be gangsters." Fisher, whose family firm also advised Esposito, said that Towns was not tipped off by party leaders about the undercover operation.

In any event, the city's taxi commissioner at the time of the 1982 Towns meeting, Jay Turoff, a close Esposito ally, was told by DOI about the undercover operation because Gruskin's company was being used at precisely the same time to ensnare another high-level taxi commission official in an entirely separate case. Esposito and Turoff, who denied in a Voice interview that he relayed any information about Gruskin's operation to Esposito, wound up convicted in unrelated federal cases years later.

When the Voice did its 1983 story, Towns offered a variety of explanations for his return of the cash, which he acknowledged receiving. He said at first that it exceeded the $1,000 corporate campaign contribution limit, though, in fact, all corporate donations were illegal. Initially refusing to say that he'd taken the donation in cash at all, he ultimately issued a statement saying he returned it because it was cash, a violation of federal law. He also conceded that Salini representatives "attended several of his campaign fundraisers and had continuing discussions" with him. Though Towns' congressional office was emailed a detailed description of this story, he declined to respond to questions.

Towns and the councilman convicted in the Salini probe, Luis Olmedo, were listed references for Jose Torres, the Salini corporate secretary, who was appointed to a community planning board Towns controlled in East New York. Towns' boss, Borough President Howard Golden, made the appointment 20 days after Torres applied in the summer of 1982, pushing him ahead of a long waiting list. The Torres appointment was listed as an "overt act" in Olmedo's conspiracy indictment.

A former federal law enforcement source recalled that one of the undercovers, Sal Palmieri, told Towns at one point during the meeting: "We're partners, we're friends." This source said Towns "didn't say much," but quietly acquiesced to that description. This source said Towns never reported this as a returned contribution on his campaign filings, which he was required to do, and that federal prosecutors debated whether or not to indict him. This source said the videotapes never added up to a bribe under federal statutes, but that Towns did appear to reach the evidentiary standard for receiving "an illegal gratuity." Gruskin, dubbed "the man of a thousand faces," says now: "The prosecutors should have prosecuted. Why didn't it go forward?" Gruskin's scorecard at DOI included 97 Housing Authority employees busted for false elevator repair submissions; 20 city marshals, auctioneers and buyers; 9 consumer affairs inspectors and 57 supermarket staff apprehended for taking bribes.

Towns, who is expected to be named to take over the Oversight Committee in the next few days, has been criticized by top Democrats for numerous absences at committee hearings, including all but one of the six October recess hearings that Waxman held to probe the Fannie Mae, Freddie Mac, Lehman Brothers and AIG collapses.